Abstract
For over a century now, historians have debated the causes of the lagged industrialization of the Dutch economy during the nineteenth century. In doing so, successive generations have offered widely varying explanations that focused on specific proximate causes. At the same time, the change from an assumed macroeconomic stagnation to
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a process of sustained income growth was placed at different moments in time. To this status quo of parallel hypotheses on the timing and mechanisms of the Dutch growth transition, the present study brings the analytical perspective of relative prices, the functioning of markets and microeconomic choice in the allocation of resources. Its critical insight is that only an approach based on the integrated incentive structure of the economy allows us to delimit the role of alternative explanations. A comprehensive analysis along these lines shows that the transition to faster growth cannot be retraced to a single mechanism. Instead, there was a confluence of forces, with the dependence on imported coal, the lingering high cost of labor, the institutional legacy of the Republic, international price movements and the fiscal stance adopted in response to Belgian secession as the most prominent. From a nadir in trade performance around 1830, prices and international liberalisation led to an advantage in agricultural exports, while colonial trade and transport was stimulated and protected. In addition, a structural decline in the price of manufactured goods prevailed, resulting in a lasting pressure on costs that Dutch industry was unable to meet. Where, in the absence of inflation, the wage level was only gradually overtaken, the second factor changed with the decline in international transport costs and the abolition of the national excise on fuel. This, in turn, was one of the taxes that had been raised or reintroduced in response to Belgian separation. The same policy stance perpetuated a system of local fiscal autonomy and market regulation that placed extensive restrictions on production methods and economies of scale, while limiting competition. The nevertheless derailing public debt under Willem I is also likely to have crowded-out private saving in a one-for-one manner. In these various ways, the fiscal policy stance contributed to an explicit slowdown from the 1830s. All this meant that the transition to 'modern economic growth' after 1860 came about only after a stabilization in sectoral terms of trade, a decline in international transport costs and a period of politicoeconomic reforms. These ranged from a restructuring of the public debt and the liberalization of trade and transport, to the realization of a regional credit function by the central bank. In the period up to 1913, the structure of growth continued to shift. The massive import of cheap grain from the New World after 1880 led to an enhanced release of rural labor and accelerating urbanization. And from the 1890s the no longer falling real unit cost of labor led to a heightened appeal of investment in modern production goods. These findings make that Dutch industrialization is best described in terms of the dependent economy model, albeit with a technologically determined disadvantage in natural resources and a decisive role for institutional adjustment.
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